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Soft Paternalism: Using Prices to Change Decisions
10 Comments | Posted by gimme-five in Politics
I was reading the April 8th issue of The Economist, which featured an article entitled: “The State is Looking After You.” It discussed how the thought of soft paternalism is being bred in the United States. The following definition is from the Stanford Encyclopedia of Philosophy:
Soft paternalism is the view that the only conditions under which state paternalism is justified is when it is necessary to determine whether the person being interfered with is acting voluntarily and knowledgably.
In other words, soft paternalism can be acheived by altering market conditions (i.e. prices) to persuade people to make the choices that maximize their own well-being AND the well-being of society. The key idea behind soft paternalism is that people make these choices on their own, rather than being forced to make them. As Ben posted in one of my recent articles about a fat tax on soda, this is sometimes called a “Nanny State.”
Soft paternalism could be implemented, for example, by taxing gas guzzling cars to encourage the purchase of more efficient cars. It could also be implemented by taxing unhealthy foods, such as soda, or products which may be unsafe. It could also be implemented the opposite way by giving incentives to people for purchasing fuel-efficient cars or healthy food. [however, it's probably a better idea to provide disincentives rather than incentives since people typically have loss aversion, meaning that equal sized gains in wealth have smaller magnitude than equal sized losses]
Is it a good idea? To some extent, I think it is. People are definitely ignorant about a lot of issues that can significantly impact their health, safety, finances, and those of the entire country. Thus, a soft paternalist socity could help correct these ignorances, while still allowing people to make the “wrong” choice if they really wanted to.
However, it could be a very bad idea if the following were to happen:
- The government does not choose what is really best for society due to “politics.”
- The “right” choice changes over time and the government does not react quickly enough.
- Over time the government might become more hard paternalistic and this could basically result in America not being American anymore.
Anyways, I feel like we already have a soft paternalistic society to some extent, and I don’t mind it, really. I would say perhaps we should change hybrid tax incentives to gas guzzling tax disincentives, because I think that might be more effective. (or a higher gas tax, which is what I have been begging for…)
Let me know what you all think.
10 Comments for Soft Paternalism: Using Prices to Change Decisions
Waco Kid | May 13, 2006 at 1:19 pm
Chris H | May 13, 2006 at 3:08 pm
Please tell me how having the government decide what is right for us in a market constricting sense is different than the NSA snooping into our phone calls.
How can you support one view, without supporting the other?
Side 1:
The government infringing on our civil liberties is a slippery slope, because once it starts, we turn into a George Orwell type state. We need to “rid” our society of “freedom.”
Side 2:
The government constricting our markets is a good thing, because the gov’t always knows what’s best for us. We need to “cure” our society of “ignorance.”
I’m a little worried that any charismatic politician(s) can blind us to the differences between the two sides.
steve | May 13, 2006 at 10:03 pm
I think the NSA issue is in a different realm. I have no problem with the government monitoring where calls go; the problem is that they did it without telling anyone what they were doing. That’s not soft paternalism, that’s hard paternalism.
Can paternalism be different when talking about the economy than in other areas? I think so. I am completely opposed to paternalism when it comes to our first ammendment rights. Just because something is offensive, intimidating, or plain wrong doesn’t justify the state from banning it. In terms of socioeconomic paternalism I have a different outlook. It’s pretty obvious that people in the lower socioeconomic classes, which are made up of a disproportionate percentage of minorities, do not have the same opportunities to be successful as people in the higher socioeconomic classes (ie. most people at W&M). These lower classes have been kept down in a perpetual cycle, except for a few people who manage to break free. I am in favor of government programs and laws that would help these people gain an equal opportunity to succeed. Is this even paternalism? I guess you could call it that, but it’s just more fair.
jon | May 13, 2006 at 10:56 pm
the stuff george is talking about isn’t socioeconomic paternalism like you are talking about. You are talking about equalling the strata of society. Elevating lower classes etc. That means giving incentives for advancement to lower classes, disadvantaged people, that kind.
the stuff the bro and I are balking at is the idea of restriction of choice. Your paternalism is seen as ok, by some, because people aren’t allowed (by societal and economic reasons) to reach their potential. It is aid. People object to this kind of stuff when there is a penalty on one area of the society to aid the other.
The issues here are much larger in scale because they effect everyone. A gas tax doesnt just rob from the rich to give to the poor….it robs from everyone and effects the poor with a greater percentage of their total spending power. And the product of this kind of stuff is uncertain. I don’t know what to say about it.
Is there a price on extending oil reserves another 5 years? Is there a price on reducing US emmisions while other countries start industrializing?
Of course this stuff is uncertain, and what my brother is concerned about is a knee-jerk, touchy-feely reaction from political types.
Because when you get down to it, the politicians are making the rules, and they are there on a certain term. Half of their job can be seen as trying to act with the future in mind, and half of the job is to just get re-elected. So understandably we have a cynical view on other people determining what is “best” for the entire society.
jon h | May 13, 2006 at 11:00 pm
huh…for some reason that came off with steve’s handle… i don’t know why…
I'll comment quickly | May 15, 2006 at 7:47 pm
Two separate ideas.
3 really if you want to compare the govt monitering your phone calls. I’ll ignore that one since it really is a different issue though it does deal with personal freedoms too.
1. Market incentives/disinctives to engineer public policy.
2. Using a tax to internalize the social costs to private corporation profits.
Both have their place. My gut reaction though is that higher taxes on gasoline would really be more of the second. The air pollution or social cost that is caused by the use of gasoline is not borne on the gas companies. They reap private profits without regard to those social costs. Also, the use and cost of the military for ensuring an oil supply is also not fully funded by the oil companies. So a higher gasoline tax would be more of a way to internalize these extra social costs.
Matt Dinan | May 18, 2006 at 12:39 pm
dude… i read this article in the economists too; but more importantly, one of the last things we learned in econ 102 is that fiscal policy (like tax breaks or whatever) generally have 1) little really effect and 2) are completely crowded out due to the interest rate effect after a period of about five years ON THE ECONOMY, but their effect on consumer choices (what people buy and how much) is a more complicated issue. My view of the role of government is simple: to protect the rights of its citizens, no more, no less. Those righs, in my way of thinking, are life, liberity and the pursuit of happiness. The first means the government should keep you as safe as possible, the second means that your civil and political rights must be upheld and the 3rd means along as you aren’t hurting anyone else you can basically do whatever makes you happy (or you think will make you happy). The point is I would only approve of any sort of economically motaviated paternalism if it clearly acheived one of those three goals… the only one it could possible apply to is that first one, safety, the right to life. An example would be a “sin tax” such as the one on cigrattes … but why not just make cigrattes illegal? They endanger the smoker and everyone around them. Taxes should be used for one thing: to make the government money, not as a tool to meddle in the economy, nor in society. And making laws against dangerous stuff isn’t paternalism, soft or hard. Paternalism would be telling people what job they have to have or who they can or cannot marry or the like. And that is simply unacceptable in all circumstances.
Matt Dinan | May 18, 2006 at 12:45 pm
PS when I say ON THE ECONOMY I am refering to the economic equalibrium at Potential Output = Full-Employment Output = Output at Natural Rate of Unemployment … Fiscal policy can charges prices over time, but the effects on output is temporary at muted by the interest rate effect, international effect and weath effect
Waco Kid | May 18, 2006 at 5:43 pm
Looks like somebody had Haulman. Always was a monetarist that Haulman.


We already have a gas tax.